Transcript Part One - Lingnan University

Part One
Business Markets and
Business Marketing
Part One
Business Markets and Business Marketing
Orients you to some of the unique phenomena and players in
business markets:
Chapter 1 – What is B2B?
Chapter 2 - The buyer-seller relationship
Chapter 3 - The purchasing Function
Chapter 4 - Organizational Buyer Behavior
Chapter 1
What is Business Marketing
Learning Objectives
The aim is to introduce and explore the characteristics
and dimensions of business-to-business marketing
• Define and explain the nature of business markets
• Identify the different types of organizational customers and
categorize the goods and services that are sold and bought
in business markets
• Explore the characteristics of B2B marketing
• Discuss the nature of demand for business products and
services
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What is Business Marketing (B2B)
Business Marketing is marketing of goods and services to:
• Companies
• Government Bodies
• Institutions (i.e. hospitals)
• Non-Profit Organizations (i.e. China Red Cross)
These products and services are purchased for:
• Use in producing their products (i.e. raw materials,
components, tools and machinery)
• Facilitate their operations (i.e. copy papers, fax machine,
desktops)
1-5
Example: How Salt is Distributed (Video)
Business marketing
Business Marketing
Consumer Marketing
McDonalds
Salt is added to
fries
You
Salt mine
Morton’s Salt
Salt is mined
Salt is processed into
food-grade or
industrial grade salt
Kroger
Salt is sold in
shakers
General Foods
Salt is added to
frozen dinners
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Types of Business Customers
Original Equipment Manufacturers (OEMs) – purchasers of
products to be included in its own final product
Users – when purchasing products/services to be consumed in support of the
firm’s operation
Government Agencies – the largest, single purchaser of products and
services
Institutions – the college or university
Industrial distributors – similar to the wholesaler/retailer serving the
consumer market
As compared to individual consumers, business customers are:
1)
2)
3)
4)
Larger – buying in large quantities
Fewer in number
More geographically concentrated
Globally oriented
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Types of Products in Business Markets
Raw materials – e.g., gold purchased by AT&T
Manufacturing materials – raw materials which have been further
processed or transformed to make them suitable for specific applications
Component or OEM parts - part of a completed product; parts that
may be assembled into a final product without further processing
Accessory equipment (tools) – e.g., computers used to guide/control
the manufacturing operations in a firm
Capital equipment (machinery) – large, expensive items directly used
in the production process
MRO items (operating supplies) – products purchased for use in the
firm’s operations, maintenance, repair, and operations products. Other
names are facilitating supplies or facilitating services, such as the hiring of
an advertising agency
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Differences between B2B vs. B2C
• Varying buyer-seller relationship
• Shorter distribution channels
• Greater emphasis on personal selling
The small number of large, geographically concentrated buyers in this
market makes shorter channels and long-term relationships
feasible/necessary. Both of these factors favor personal selling.
• Greater web integration
The web is a perfect tool to speed communications required for effective
coordination between partners who trust each other.
• Unique promotional strategies
E.g., trade show, public relations
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Unique Nature of B2B
BUSINESS TO BUSINESS DEPENDS ON:
• Close Business and Personal Relationships
Because of
• Shorter Distribution Channels
Leads to
• Emphasis on Personal Selling
Through
• Dependence on WEB Integration
and
• Unique Promotional Strategies
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Customer Focused Team Structure
OEM parts
Components Manufactured
Raw materials materials
Assemblies
Subassemblies
Original
equipment
products
Maintenance
repair, and
operations
supplies
OEM
Distributors
ValueIBM
added
resellers
Integrated
solutions vendors
Capital equipment
Accessory
equipment
Facilitating
services and
Users
products
Supply houses
Maintenance,
repair, and
operations
supplies
Components Raw materials
Manufactured materials
1-11
Business Markets Challenges
• The size and location of customers – bigger, fewer, and
concentrated
• Strict performance standards for products by customers organizational purchasing have strict performance standards
for products: cost constraints; design specifications; delivery
windows and durability requirements
• Complicated purchasing decisions – Involvement and time: a
large number of people involved require a longer time to
negotiate
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Business Market Face Derived Demand
• Derived Demand
- The reality that business demand for products & services is
shaped by the requirements of the products and services
demanded by their customers
- Most demand comes from consumers
• Joint Demand
- Situations in which two products are used together and
demanded together
- The demand for each is significantly affected by changes in
the demand for the other
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Example: Derived Demand Simplified
You can make headlamp assemblies for autos – Auto company’s
demand for headlamp is affected by the consumers’ demand
for cars.
Consumers want
more cars
Consumers stop
buying cars
Automobile
manufacturers need
more components
and steel
Automobile
manufacturers stop
making cars
Need more of
your company’s
headlamp
assemblies
You can’t sell
headlamp
assemblies
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The Entire Systems
Transported via facilitating services
Raw
Manufactured
Materials materials
Subassembly
Assembly
Component
parts
Finished
car
Purchase order printed—facilitating product
Amount and type of car determined by
research—facilitating service
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Understanding the Market
Three critical questions for a successful B2B program
A business must determine:
1.
Who Are Its Customers? (Target markets)
2.
What Do Its Customers Want? (Identify)
3.
How Do Its Buyers Make Their Buying Decisions? (Identify)
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